Outsourcing and offshoring practices have become common strategies in today’s workforce. Many businesses looking for solutions to refine specific operations, increase productivity and reduce overall business costs have turned to outsourcing solutions.
In most cases, businesses begin looking into outsourcing strategies when they want to find strategic solutions that will propel their business forward in the long run. Before getting started, however, it is important to understand the difference between outsourcing and offshoring. Knowing the differentiators between outsourcing and offshoring can help you identify the best strategy for your business.
Continue reading to learn more about outsourcing vs. offshoring and their impacts in the global marketplace.
Outsourcing vs. Offshoring: What’s the Difference?
Generally, outsourcing happens when businesses allocate functions to third-party vendors. A company hires another company to handle its nonessential functions rather than keep them in-house. Some outsourcing examples would be your business hiring a third-party vendor to handle operations like HR management or IT support.
Offshoring can be considered a type of outsourcing. The difference between domestic outsourcing vs. offshoring is that offshoring involves companies relocating their services or operations to another country. Offshoring examples can include building a factory abroad or hiring a foreign workforce for your labor needs.
Domestic Outsourcing
Domestic outsourcing happens when businesses allocate some of their nonessential activities to other businesses that operate in the same country. A US-based digital marketing agency can acquire the services of a home-based accounting firm, for example.
There are several key benefits that come with domestic outsourcing:
Effective Communication
By opting for domestic outsourcing solutions, companies avoid any potential language or cultural barriers that might make communicating difficult between two or more businesses.
Quality Control
Companies must have well-structured strategies to help them achieve high standards. Domestic outsourcing makes it easier for companies to train employees, assign appropriate tasks, and establish a protocol for their operations.
Focus on Core Objectives
Companies that outsource nonessential activities both domestically and through offshoring have more time to focus on their primary objectives. In doing so, they can establish benchmarks and well-thought-out goals to help them grow in the long run.
Offshoring
Offshoring happens when a business relocates its productions or services to another country. The US auto industry is an example of an industry outsourcing a portion of its business to other countries. Some real-world offshoring examples include Ford. Ford has established an offshore presence in Mexico, including production facilities and assembly plants across the country.
Offshoring practices come with several benefits:
Labor Cost Savings
By shipping production services to other countries, US-based companies can acquire a highly skilled workforce that can complete the same tasks at a lower price than domestic workers.
Market Development
Companies that engage in offshoring strategies have the opportunity to establish new markets in different countries, leading to business expansion and customer base growth.
Larger Talent Pool
By offshoring, a company can benefit from a wider talent pool. This allows companies to better identify top talent that they would not have considered before.
Outsourcing vs. Offshoring: Which to Choose?
The discussion over outsourcing vs. offshoring practices leads to one critical question: Which option is better? There are benefits and drawbacks that need to be considered when deciding on a strategy.
Benefits of Outsourcing |
Drawbacks of Outsourcing |
|---|---|
| Outsourcing is beneficial when companies seek out high-quality vendors, labor flexibility and focus primarily on core business objectives. For example, an IT service agency can outsource payroll tasks to a human resource firm. | Outsourcing is not a beneficial strategy when clients are dealing with a third-party vendor who may not be entirely familiar with a clients’ business and or objectives, leading to possible conflicts and inadequate progress. |
Benefits of Offshoring |
Drawbacks of Offshoring |
|---|---|
| Offshoring strategies are beneficial when companies want to expand their market base beyond their borders and acquire a highly skilled workforce at a low cost. For example, a U.S.-based company might establish factories outside the country, leading to cost savings while also gaining access to a talented labor force. | Without the right strategy in place, offshoring can be difficult. Because you are outsourcing to another country, there are considerations to make with employee paperwork and benefits as well as time zone differences. Thankfully, these drawbacks of offshoring can be overcome by partnering with the right outsourcing solutions firm. |
Help Your Company Grow with C9 Staff
C9 Staff is an outsourcing solutions firm that is passionate about your business’ growth. Our team is dedicated to helping clients prosper in an ever-changing global economy by connecting them with top talent across the globe.
Whether it’s a digital marketing agency or a healthcare company, C9 Staff is more than capable of delivering a high-quality staff for multiple industries while helping them achieve their business and sales goals.
What makes C9 Staff unique is our end-to-end managed services, which streamline the outsourcing process. From employee benefits and paperwork to seamless onboarding, C9 Staff is ready to help with every step.
Ready to expand your business with offshoring?
Contact C9 Staff today and receive amazing talent from over 35 international low-cost labor markets.
